Download The great divide: exposing the Davos class behind global economic

State of Civil Society/ The search for an equitable economic order
The great divide:
exposing the
Davos class
behind global
economic
inequality
Nick Buxton
Transnational Institute
Two years after Occupy gave voice to popular
anger at growing inequality worldwide, the
issue of the 1% versus the 99% continues to
top the political agenda. At times, though, this
takes a very incongruous form, and no more so
than in January 2014 when multi-millionaires
gathering at the luxurious ski resort of Davos,
Switzerland declared inequality their chief
concern. The World Economic Forum (WEF)
even seemed to welcome admonishment
from the Pope and Oxfam, with Klaus Schwab,
the executive chairman, agreeing that, “we
have too large a disparity in the world.”1
But there was one mea culpa that those at
the WEF were not willing to make: admit that
the existence of exclusive meetings and the
agenda they coordinate – of the economically
rich and politically powerful – is one of the
key reasons for this gross division of wealth.
Economic inequality is fundamentally a
reflection of political inequality: the poor and
rich have very different stakes and control of
our political systems and the exercise of this
power is seen most visibly in who benefits
from the global economy.
The Davos Class
Davos, perhaps more than any other
gathering, epitomises the way political
power and global governance have in recent
decades been entrenched into a small
corporate elite. This elite has succeeded
not only in capturing our economy, but also
our politics – and increasingly our culture
and society, too. Davos is the networking
conference par excellence, where economic,
political and cultural powerhouses are
encouraged to mingle on equal terms. Over
cocktails and asparagus mousse, corporate
executives can hobnob with prime ministers,
renowned academics and the occasional rock
star celebrity, and stitch the deals that will
keep profits flowing. The most likely Davos
twitter status update, as Daniel Gross of the
Daily Beast accurately satirised, is: “About
to go into top-secret meeting with powerful
person. Will tell u all about it when I’m back
in ny/dc #wef.”2
Political scientist Susan George has labelled
this elite the Davos Class, noting that they
are “nomadic, powerful and interchangeable.
Some have economic power and usually a
considerable personal fortune. Others have
administrative and political power, mostly
exercised on behalf of those with economic
power, who reward them in their own way.”
She goes onto argue that they are united by
a programme “usually called ‘neoliberalism’,
based on freedom for financial innovation,
no matter where it may lead, on privatization,
deregulation, and unlimited growth; on the
supposedly free, self-regulating market and free
trade that gave birth to the casino economy.”3
A 2014 report by Transnational Institute (TNI),
entitled State of Power – Exposing the Davos
Class, examined how successful neoliberalism
has been in enriching economically as well as
amplifying the power of this small corporate
elite.4 It revealed how the world’s wealth is
concentrated even more than is popularly
understood, not in the 1% but the 0.001%:
111,000 people control US$16.3 trillion,
equivalent to a fifth of the world’s GDP. Even
in the wake of the economic crisis, the world’s
millionaires have thrived. In 2012, the wealth
of the world’s millionaires grew by 11% while
household income in the European Union and
United States either stagnated or, in some
cases, fell.
This economic wealth is matched by growing
dominance of transnational corporations in
the global economy. Today, 37 of the world’s
largest economies are corporations. Walmart,
Shell, Volkswagen and others have become
modern-day empires, bigger economically
than Denmark, Israel or Singapore. A historic
study by mathematicians in the Zurich
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State of Civil Society / The search for an equitable economic order
Polytechnic Institute revealed an even greater
concentration of economic power when they
focused on ownership of these companies.
In a study of 43,000 corporations, they found
just 147 companies control 40 per cent of the
economic value of the entire sample. Most of
these are banks, hedge funds or other financial
services corporations. Even an advisor to
the Deutsche Bank, George Sugihara of the
Scripps Institution of Oceanography in La Jolla,
California, admitted that, “It’s disconcerting to
see how connected things really are.”5
Corporate capture
Corporations have been able to achieve this
unprecedented power through a systematic
takeover of the state, rather like a virus
infects a body. Driven by a profit-making
motive embedded in their genetic make-up,
corporations have sought at every stage to
remove any disadvantageous regulatory
barriers and facilitate their cancerous growth.
A book published in 2014, A Quiet Word:
Lobbying, Crony Capitalism and Broken Politics
in Britain, chronicles how corporations have
become adept at using an array of tactics,
from well-resourced media relations work
to funding think-tanks and fake grassroots
groups, in order to push through government
policies beneficial to their bottom line.6
Corporations are also staffing government,
whether by providing contractors and running
previously public services or by seconding
staff to ministries. The revolving door has
146
become a well-oiled one, with politicians and
businessmen changing places regularly.
The infection has been so effective and thorough that it is increasingly difficult to assess
who is a public official and who is a corporate
leader, given the revolving door between these
positions. One example covered in TNI’s State
of Power report is the European Round Table
of Industrialists (ERT), a network of about 50
of Europe’s largest corporations, which in the
early 1980s decided to work together to shape
EU policy and encourage the development of
a competitive (read: de-regulated or re-regulated in their favour) ‘internal market’.
By 1993, the group had been so successful
that one senior ERT official said their proposals and the EU’s proposals were almost done
in “parallel… we saw their drafts and they saw
our drafts. And one of my friends, a very senior
official in the Commission, he said to me, there
is basically no difference between them.” More
recently, ERT’s demands for ‘fiscal consolidation’ – in other words, austerity for ordinary
people but not for publicly bailed out corporations – have been wholeheartedly applied
by European governments and the European
Commission, with terrible social costs. After
several years of EU austerity packages, Greeks
are now on average almost 40% poorer than
they were in 2008. There has been a drastic
rise in those losing their homes, while one in
three children (around 600,000) are now living
below the poverty line.7
This corporate capture of politics and the social
deprivation that often results is taking place in
nations worldwide. A study by the Bureau of
Investigative Journalism showed, for example,
that the financial services sector in the United
Kingdom spent UK£93m on lobbying in 2011.
This money secured significant policy changes,
including slashing UK corporation tax, neutering a pension scheme supposed to benefit millions of low paid temporary workers and killing
off a new corporate super-watchdog.8 There
are, of course, no comparable lobbies for citizens who have lost their houses or savings as
a result of the financial sectors’ reckless decisions that caused the global economic crisis.
Corporate-led governance
The corporatocracy also increasingly seeks
to poke its nose into the realms of global
governance. One approach taken has been to
promote ‘multi-stakeholderism’: the idea that
policy is best developed if you bring together
different stakeholders – governments,
corporations, citizens. This has been widely
embraced by some civil society groups as an
effective way of bringing decision-making
processes ‘closer to the citizen’ and therefore
making them more democratic, legitimate
and accountable. This approach is usually
combined with promotion of corporate
social responsibility (CSR), the idea that
corporations can be driven by factors other
than profit and can be social actors that take
responsibility for their actions and impacts.
State of Civil Society/ The search for an equitable economic order
This approach has led to the emergence of
hundreds of multi-stakeholder corporate
responsibility initiatives, such as the Forest
Stewardship Council and the Extractive
Industries Transparency Initiative, as well as
policy forums such as the World Water Forum
and the Global Knowledge Partnership.
Davos has been a very keen advocate for
multi-stakeholderism and corporate social
responsibility. In 2009, taking
advantage of the global crisis,
WEF launched the Global
Redesign Initiative (GRI),
aiming “to stimulate a
strategic thought process among all stakeholders about ways
in which international institutions and
arrangements should be
adapted to contemporary
challenges.” Its final report
advocates a stakeholder and
corporate responsibility approach
in every aspect of public policy.9 The theme
of this year’s WEF, ‘The Reshaping of the
World’, clearly builds on this proposal.
GRI’s vision rejects intergovernmental
agreements, international frameworks
and enforceable hard law that would
constrain corporations, favouring instead
volunteerism, codes of conduct and soft
law. In the world of Davos, the tired old slow
world of democratic demands channelled
through states is replaced by a slicker, fastmoving, corporate-led governance. In fact,
GRI argues quite bluntly that “governing
today is no longer a matter for government
alone… governments’ basic ‘public functions’
have been redefined… hence the challenge
is how to re-invent government as a tool
for the joint creation of public value.” In
other words, governments and citizens
become just actors amongst
many, forced to acquiesce
with a process driven by
profit-seeking.10
A flawed
record
Advocates promote
m u l t i - s t a ke h o l d e r
and CSR initiatives
saying
they
have
facilitated
better
transparency and more
consultation
with
affected
groups, for example. However, in many
cases, multi-stakeholder processes can also
end up legitimising exploitation as they
stave off regulatory action that might halt
or prevent destructive activities in favour
of market-based solutions. They also tend
to exclude conflictual civil society groups in
favour of more consensual ones, which are
often better funded, willing to make deals
and accept ameliorative change. In either
case, civil society is constantly outgunned
by corporations in terms of resources,
which means that effective monitoring and
evaluation of corporate commitments is
hard to evaluate and control.11
It is worth heeding the warning of Marcos
Colchester, reflecting on the history of the
Forestry Stewardship Council, which he
helped found and eventually resigned from
in frustration at its inability to affect high
rates of deforestation:
“I think there is a major problem with the
model of self-regulation which gives no
role to the State, to the rule of law, or even
to leverage for reformed governance by
government itself. Instead, almost without
realizing it, conservationists have replaced
the organs of democracy: we now have
consumers instead of enfranchised citizens;
we have NGOs in watchdog roles to replace
the executive; we only have recourse to
the media – the 4th Estate – as a court of
appeal.”12
One could of course add that the media
itself, dominated by corporations, is not
always a great ally either.
Marcos’ personal experience of the failings
of CSR is starting to be confirmed by data.
In 2013, an exhaustive three-year study
of more than 5,300 small and medium
enterprises and more than 200 large firms
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State of Civil Society / The search for an equitable economic order
based in Europe came to the conclusion
that CSR activities “have not made a
significant contribution to the achievement
of the broader policy goals of the European
Union.” The researchers argued that the
study “raise[s] important challenges to longaccepted beliefs and arguments in favour or
defense of the traditional approach to CSR.”
Yet despite the EU funding the project with
€2.7 million, it has been noticeably silent on
the implications of the study’s conclusions
for European policy, which continues to
advocate for corporate-led governance and
against binding rules.13
Neither CSR nor multi-stakeholder initiatives
can escape the reality that the political
power that economic giants now have
unbalances the playing field for any other
participants. This is very clearly on show at
Davos meetings, which Schwab likes to tout
as a theoretical working model for the global
governance toward which Davos aspires. In
2014, while some 1,500 business delegates
attended, they were joined by only 37 civil
society organisation (CSO) leaders (mainly
from large civil society organisations) and
10 labour leaders. Moreover, a look at the
prominent corporate members of Davos
quickly unveils a history of fraud, tax evasion,
human rights abuses and environmental
degradation, none of which, it seems,
disqualifies them from having open access
to Davos and governments worldwide.
148
Extending the
architecture of impunity
Rather than curtailing or limiting their power,
forums like Davos are the hatching place for
new attempts to extend corporate power and
prevent increased state regulation. The idea
for the North American Free Trade Agreement (NAFTA) between Canada, Mexico and
the US germinated at Davos. Twenty years
later, even its strongest advocates find it hard
to argue that there have been many benefits. For Mexico, its legacy has included one
of the lowest economic growth rates on the
continent, severe environmental contamination, devastation of the rural economy
and soaring levels of violence that have
wracked the country. 14
Unperturbed by the impact of their policies
on those they will never see, corporate and
political elites were in Davos in 2014 pushing for the conclusion of new trade deals,
particularly the Transatlantic Trade and
Investment Partnership (TTIP). Worldwide
the surge of trade and investment agreements have created what TNI’s anti-corporate campaigner Brid Brennan calls an
“architecture of impunity” for corporations
who use these agreements to sue any government for measures that affect their profits. Brennan argues, “This not only undermines government capacity to control their
own resources and development plans, it
also prevents any proper regulation of corporations who are allowed to act with impunity.”15 A report by TNI in 2014 unveiled
how these trade and investment treaties
are wreaking havoc in Europe’s crisis countries, where corporate speculators are using
investment agreements to sue Cyprus,
Greece and Spain alone for at least €1.7
billion for policies the governments took
to deal with the crisis. Spain is, as a result,
spending millions in 2013 on defending
itself in lawsuits; at the same time, it cut
health expenditure by 22% and education
spending by 18%.16
One woman, when asked at the end of
the WEF in 2014 what happened to the
theme of inequality responded, “It kind of
disappeared.”17 For a small elite used to a
certain way of living, focusing on lives they
will never experience or never even see
must be a strain. Relying on the Davos class
and their models of governance is no answer
to the deepening divide between those with
power and wealth and those without. A
greater hope lies with civil society and social
movements challenging corporate and elite
power and deepening democracy at local,
national and global levels.
Fortunately, calls for binding obligations on
transnational corporations and a rejection
of a corporate-led international governance
are being heard ever more loudly within
State of Civil Society/ The search for an equitable economic order
civil society. Nationally, campaigns are
challenging corporate capture of government
with ever more vigour, for example in the US
by challenging corporate rights under the
constitution. Worldwide, a rapidly growing
movement, Stop Corporate Impunity, has won
the support of more than 100 international
organisations and is advocating for a Peoples’
Treaty to regulate and restrict the power of
corporations. In September 2013, Ecuador
backed by the African Group and a number of
other countries echoed this civil society call,
at the UN, saying:
“An international legally binding instrument...would clarify the obligations of transnational corporations in the field of human
rights, as well as of corporations in relation
to States, and provide for the establishment
of effective remedies for victims in cases
where domestic jurisdiction is clearly unable
to prosecute effectively those companies.”18
1
Global elites finally admit income inequality is a problem,
Salon.com, 29 January 2014, available at:
http://www.salon.
com/2014/01/29/the_super_rich_from_their_alpine_resort_
inequality_is_a_serious_issue_parnter/.
Multi-Stakeholder Governance Forums: The Crisis of the Forest
Stewardship Council, 2012, available at: https://www.academia.
edu/2602980/The_Limits_of_Multi-Stakeholder_Governance_Forums_The_Crisis_of_the_Forest_Stewardship_Council_FSC_.
D Gross, tweet, available at: https://twitter.com/grossdm/
status/162443049279029248.
13
Impact Project: Executive Summary, CSR Impact, September
2013, available at: http://csr-impact.eu/documents/documentsdetail.html?documentid=22.
2
3
S George, Whose Crisis, Whose Future? (Cambridge: Polity Press
and John Wiley & Sons, 2010), available at: http://www.tni.org/
tnibook/whose-crisis-whose-future
N Buxton (ed.), State of Power – Exposing the Davos Class,
Transnational Institute, 2014, available at: http://www.tni.org/
briefing/state-power-2014.
14
M Weisbrot, 20 years of regret for Mexico after NAFTA, Guardian,
4 January 2014, available at: http://www.theguardian.com/
commentisfree/2014/jan/04/nafta-20-years-mexico-regret.
4
A Coghlan and D MacKenzie, Revealed – the capitalist network
that runs the world, New Scientist, 24 January 2011, available at:
http://www.newscientist.com/article/mg21228354.500-revealed-the-capitalist-network-that-runs-the-world.html.
Personal communication with author, 12 March 2014.
15
Above fn 7.
16
5
T Cave and A Rowell, A Quiet Word: Lobbying, Crony Capitalism
and Broken Politics in Britain, (London: Vintage, 2014).
17
Income Inequality was quickly forgotten at Davos, Daily Beast,
26 January 2014, available at: http://www.thedailybeast.com/
articles/2014/01/26/income-inequality-was-quickly-forgotten-atdavos.html.
6
18
For more information, please see: http://www.businesshumanrights.org/Links/Repository/1022442.
P Eberhardt and C Olivet, Profiting from Crisis – How corporations
and lawyers are scavenging profits from Europe’s crisis countries
(Transnational Institute/Corporate European Observatory, 2014),
available at: http://www.tni.org/profiting-crisis.
7
Revealed: The £93 million city lobby machine, Bureau of
Investigative Journalism, 9 July 2012, available at: http://www.
thebureauinvestigates.com/2012/07/09/revealed-the-93m-citylobby-machine/.
8
R Samans, K Schwab and M Malloch-Brown (eds), Global
Redesign - Strengthening International Cooperation in a
More Interdependent World, World Economic Forum, 2010,
available
at:
http://www3.weforum.org/docs/WEF_GRI_
StrengtheningInternationalCooperation_Book_2010.pdf.
9
At meetings of the UN Human Rights
Commission in March 2014, the backlash to
this had begun, with states including the UK
and US adamantly defending the status quo.
The battle against unprecedented corporate
and elite power is on, but its success will
depend on our movements realising our
own power in numbers and turning public
awareness and anger into political and policy
change. Power to the 99.9% remains a slogan
as relevant as ever.
10
D Sogge, Not everybody’s business: corporate crowding into the
tents of global governance, openDemocracy, 23 January 2014,
available at: http://www.opendemocracy.net/david-sogge/noteverybody%E2%80%99s-business-corporate-crowding-into-tentsof-global-governance.
11
C Fauset, What’s wrong with Corporate Social Responsibility?
Corporate Watch UK, 2006, available at: http://www.
corporatewatch.org.uk/?lid=2670.
Speech at the IUCN World Conservation Congress in Durban
in 2004, quoted in S Moog, S Böhm and A Spicer, The Limits of
12
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